CenturyLink, Inc. (NYSE:CTL) Q1 2019 Earnings Conference Call - Final Transcript

May 08, 2019 • 05:00 pm ET


CenturyLink, Inc. (NYSE:CTL) Q1 2019 Earnings Conference Call - Final Transcript


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Jeff Storey

of our network and have the ability to scale the network more efficiently than anybody else. We also enhanced our product and service capabilities in cloud management, hybrid networking, dynamic connections, security and other areas.

Our transformation initiatives are well underway. And as you saw, we achieved a $128 million of annualized run rate adjusted EBITDA cost savings this quarter. These savings came from a number of different projects, while there's still more to do. We continue to see very tangible results in our -- in our efforts and they affect our cost structure and our customer and employee experience as well.

We remain committed to our deleveraging objectives and the plan we announced on the fourth quarter call expecting to reach our leverage target of 2.75 times to 3.25 times over the next three years. Finally, based on our solid progress in growing EBITDA and our view of the business over the next several quarters, we reiterated our confidence in the full year outlook we provided. As usual, Neel will update you on our detailed financial results for the quarter, and then I'll provide an update on how we are viewing the market and the overall business. After that, we'll open it up for your questions.

With that, I'll turn the call over to Neel.

Neel Dev

Thank you, Jeff and good afternoon, everyone. Let me begin with our financial summary on Slide 5. We are pleased with our continued EBITDA margin expansion and year-over-year EBITDA growth driven by our focus on profitable revenue and cost transformation initiatives. The financial guardrails and evaluation processes we have in place across the business units are working and we are adding profitable and durable revenue.

We're off to a good start on our cost transformation initiatives exiting the quarter with $128 million of annualized run rate adjusted EBITDA savings. Despite the top line decline of 5%, we grew EBITDA of 3.7% year-over-year. We expanded adjusted EBITDA margin to 40.1% this quarter compared to 35.5% at the close of the Level 3 transaction. Based on our progress to-date, we feel good about our financial performance and are reiterating our outlook for the full year 2019.

Turning to revenue on Slide 6. The total revenue in the first quarter declined 5% to $5.65 billion. Before I get into sequential revenue performance, as a reminder, fourth quarter seasonally strong and first quarter is when we typically see contract re-rates primarily for our largest customers, mainly in wholesale and global accounts.

Additionally, we had a higher than usual nonrecurring revenue of about $40 million in the fourth quarter of 2018 benefiting enterprise and international and global accounts or iGAM. With that in mind, on a sequential basis, total revenue declined 2.3%. Our iGAM revenue decreased 4.7% year-over-year. Currency was a factor in year-over-year performance, as was the revenue impact from the large contract that was renegotiated in the second quarter 2018.

The combination of those two items impacted revenue by about $30 million. Normalizing for those items iGAM